The debate was sparked last week after Cayman premier McKeeva Bush announced that the government would look to introduce a 10% payroll tax for foreigners who hold permits allowing them to work in the islands, if they earn more than $20,000 a year (£12,735, €16,305).
According to press reports, the tax could take effect as soon as next month.
But opposition to the plan is building, with a demonstration scheduled to take place this evening, ahead of a planned informational meeting at which Bush is due to address the issue.
Opponents have also set up a Facebook group called Caymanians and Expats United Against Taxation, which already has almost 10,000 members. The total population of the Cayman Islands is only around 55,000.
“Bush’s announcement…has touched off a firestorm of controversy, and plunged nearly everyone in the country – even those who don’t normally follow local politics all that closely – into aspirited debate,” according to a story posted on the CayCompass.com news website.
It notes that Bush had declared that the government’s budget process had “gone as far as we can go, and that Cayman was now awaiting a response on it from the United Kingdom’s Foreign and Commonwealth Office”.
Alternative to job cuts
Bush is presenting the tax as an alternative to cutting civil service jobs, the CayCompass and other media outlets note. He is avoiding calling it a “tax”, preferring to refer to it as a “community enhancement fee” aimed at preserving at least 500 island jobs.
Bush took office in November 2009, and has spent most of his time as prime minister attempting to keep the Cayman Islands afloat financially, as it has been hit by the global economic downturn, which has seen many financial services companies operating there, such as hedge funds, struggle, and its tourism business falter.
Because the Cayman Islands is a British Overseas Territory, the UK Government has a say in its affairs. And increasingly, it has called on the jurisdicition to move away from its dependence on its tax haven model with the introduction of some direct taxes, and by diversifying its economy.
Some observers are seeing Bush’s call for a tax on expats as a sign that the global financial crisis is continuing to deepen. "You know it’s bad," observes a commentator writing on the website of Forbes magazine, "when the Cayman Islands calls for income taxes."
